THE ALTERNATIVE MINIMUM TAX: WILL IT AFFECT YOU?

In your tax planning, don't overlook how your tax-saving strategies might be affected by the alternative minimum tax.

FORGIVEN DEBT CAN BE TAXED AS INCOME

With the recent economic downturn experienced by many taxpayers, there is a tax concept that is very important: cancellation of debt. You would think that the cancellation of debt by a credit card company or mortgage company would be a good thing for the taxpayer. And it can be, but it can also be considered taxable income by the IRS.

IS ALL MY INCOME TAXABLE?

Generally, all sources of income are subject to income tax unless specifically excluded. Here are some sources of money that are not taxable.

BUSINESS TIP

If your business is incorporated, it is often a good idea for you to personally own the business real estate and lease it to your corporation. There are a number of tax and nontax concerns relating to real estate ownership. For the income tax considerations, see us before you acquire new business property or before you change the ownership of property you already have.

PLAN FOR LOSSES

Review your S corporation basis before year-end. Check your basis in any S corporation in which you are a shareholder and where you expect a loss this year. Be sure you have sufficient basis to enable you to take the loss on your tax return.

CONSIDER YOUR MARITAL STATUS

If you're planning a wedding or divorce soon, be aware that your marital status as of December 31 determines your tax status for the whole year. Changing the date of a year-end or new-year event could save taxes.

AVOID UNDERPAYMENT PENALTIES

Don't let penalties for underpaid taxes increase your tax bill next April. Check the total tax you've paid in for 2012 through withholding and/or quarterly estimated payments. If you've underpaid, consider adjusting your withholding for the final pay periods of 2012. Withheld taxes are considered paid in equal amounts during the year regardless of when the tax is withheld. Therefore, a year-end adjustment to your withholding could help you avoid a penalty.

RECORDKEEPING TIPS FROM THE PROS

If you want to give your tax recordkeeping skills a performance boost, do what accounting professionals do.